Industry Priorities

Tax

Support Tax Policies that Promote Business Investment, Development, and Expansion

  • For contractors, high income taxes— whether corporate or individual—reduce a company’s cash flow, thereby reducing the amount of money available to these businesses to expand, purchase equipment, hire more workers, bid on future projects, and reduce debt. AGC supports keeping the federal tax burden on individuals, construction companies, and other businesses low as a means of promoting investment, business development, and business expansion. High marginal and effective tax rates inhibit entrepreneurial activity by penalizing successful businesses.
     
  • Prior to passage of the Tax Cuts and Jobs Act (TCJA), the construction industry faced the highest effective tax rate of any industry, at 31 percent, according to a 2016 study from the Department of the Treasury, Office of Tax Analysis.  While the Tax Cuts and Jobs Act reduced tax rates for construction businesses, the industry continues to pay a high effective tax rate relative to other industries; any changes to the tax rates disproportionately affects construction firms.
     
  • AGC supported passage of the TCJA.  The bill reduced tax rates for corporations and pass-through businesses, simplified tax accounting for construction businesses, repealed the corporate alternative minimum tax (AMT) and significantly reduced the impact of the individual AMT.
     
  • The majority of construction firms (more than 70 percent) are organized as pass-through businesses, such as S-Corporations, partnerships, LLC’s and sole proprietorships, meaning they do not pay the corporate tax rate, and are instead taxed at the owners’ individual tax rate.
     
  • The tax code includes a number of provisions that promote infrastructure investment and construction jobs, which AGC strongly supports.

AGC Message:

  • Make the Tax Cuts and Jobs Act Permanent. AGC supported passage of the TCJA.  While the bill improved the tax code in many important ways, much of the tax relief and tax simplification for pass-through businesses and individuals expires at the end of 2025. The following remain top AGC legislative priorities.
     
    • Make the Section 199A Deduction for Pass-Through Businesses Permanent. The TCJA created a new 20 percent deduction available to construction businesses organized as pass-throughs, but this deduction expires in 2025. The vast majority of construction firms are structured as pass-through entities and, without this deduction, face a competitive disadvantage to companies organized as C-Corporations.
       
    • Repeal the Alternative Minimum Tax (AMT). The AMT creates needless complexity and is a stealth tax increase on many construction businesses. The Act increased the exemption level for individual AMT filers, but that will expire in 2025. While the AMT should be repealed altogether, at the very least the AMT relief in the Act should be made permanent.
       
    • Repeal the Estate Tax. The TCJA increased the estate tax exemption from $5 million to $10 million, but that tax relief will expire in 2025 without Congressional action.  While AGC supports making this important estate tax relief permanent, a better outcome would be full repeal of the estate tax, which can force family-owned businesses to divert scarce resources and capital away from the business and into expensive estate planning. 
       
  • Fix the “Retail Glitch.” Lawmakers intended to allow restauranteurs, retailers, and leaseholders of commercial property to more quickly deduct certain capital construction improvements to their facilities when they included a provision on Qualified Improvement Property in the Act. Instead, a drafting error more than doubled—to 39 years—the time allowed for depreciating such improvements, causing these owners to delay or cancel renovations.  Congress must fix this technical error that is disrupting a significant commercial construction market.
     
  • Promote Infrastructure Investment in the Tax Code. AGC supports the expansion of the private-activity bond (PAB) cap to allow for additional investment in highways and utilities, and also include additional types of public infrastructure, such as public buildings like schools, hospitals and courthouses.
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